- December 14, 2016 / 2 min readEssentials with lower income elasticity such as rice, edible oils and dairy products will be impacted less by demonetisation and cash crunch, when compared with products such as ready meals and processed fruits and vegetables.
Euromonitor International which is a market research organisation on consumer products, commercial industries, demographics trends and consumer lifestyles in India, has said that the industries with low income elasticity, such as hot drinks, home care and packaged food etc are less likely to be impacted adversely due to the short-term cash crunch.
They further said irrespective of the change in the income of the consumer, the relative change to the growth in the industry will be less than when compared to industries such as beauty and personal care, alcoholic drinks and soft drinks, which require more discretionary spending.
However, there is a pain point for traditional grocery retailers as majority of them are yet to adapt to digital payment mode. As per insights shared by Euromonitor, traditional retail still account for more than 90 percent of packaged food value sales in India. Janaki Padmanabhan, Country Manager, Bengaluru division, Euromonitor, said, "Since a big part of these retailers are not well equipped with card payment machines, it is likely that sales during this period will have gone to modern/internet retailers, which offer consumers the convenience of paying by card."
Additionally, Padmanabhan said essentials with lower income elasticity such as rice, edible oils and dairy products will be impacted less when compared with products such as ready meals and processed fruits and vegetables. However, she said the impact felt will also depend on the frequency of purchase of packaged food through various retail channels.
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